When it comes to technology, apparently my generation are an auspicious lot.
We don't need anyone's permission to start a free blog of our choosing, Twitter keeps us both informed and engrossed in current affairs, Facebook enables us to connect and conspire with old friends and fresh acquaintances, and LinkedIn allows us search for new jobs and associates -- all from the comfort of our smartphones.
With this in mind, many critics argue that us Gen Y'ers should be more grateful for these technological liberties we've grown into -- after all, thanks to the unprecedented informational access afforded by the Internet, we've become the most culturally conscious, socially boisterous, and politically self-aware generation in history.
Yet the way I see it, this heightened sense of self-awareness vis-à-vis the workings of the world and our precarious place within it is as much a burden as it is a blessing. For we've grown up with the world at our fingertips, raised on the assumption that our financial prospects would be the same, if not greater, than those of our parents.
In short, we were told we could have the world, and unsurprisingly, we're getting more than a little anxious out about the idea that we won't be so fortunate.
What I mean by this is that I think it's a myth that the majority of Millennials have some sort of burning desire to rage against the machine by retreating into some sort of minimalistic bohemian lifestyle. I've got a sinking suspicion it's quite the contrary.
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Generation Y gets a bit of a bad reputation for not being able to handle their finances, but it may be a reputation that is deserved. Here are 10 things that millennials are doing wrong with their money and how they could do better.
A survey from the Canadian Institute of Chartered Accountants (CICA) shows that many young people think they are super savvy when it comes to their money. CICA spokesperson Nicholas Cheung says that view may not be justified. “A lot of them say that they’re confident in their abilities to budget or manage their spending, but many of them don’t even have a budget or don’t keep track of their spending,” he said. Instead, realize your limits and recognize that there are many things that you don’t know, and that’ll send you on the path of learning. So the next time someone comes up to you and asks, “What’s a dividend payment?” or “How do banks calculate interest rates?” you’ll have an answer to give them.
Millennials are bad at the latter. Don’t worry, you’re not alone. A study by Visa Business Insights in August showed millennials becoming the fastest growing demographic in luxury spending. We’re snatching up those high-fashion products, travelling to far flung places and eating out on the regular, but what we’re not doing is saving our money, and that, says Tom Hamza, president of the Investor Education Fund, is a mistake. “Managing your financial situation is a lot like losing weight,” Hamza said. “It’s really easy to eat more and indulge yourself, just as it’s easy to put on more debt. But the thing is, trying to take control of the situation takes a lot of discipline.”
Do you have any idea about the state of your parents’ finances? Apparently, neither do a lot of other people. The first step to knowing how to manage your money is to know about the money models around you, and who is closer than your parents? Talk to your family and learn their mistakes and their successes – they do have useful things to teach you, really! Unfortunately, they are just not very good at getting all that knowledge they have to you. CICA’s survey found that two-thirds of parents felt they were teaching badly and wanted to be able to teach better. CICA’s Nicholas Cheung says that “[t]hose parents who are most successful at teaching their kids about financial management skills are the ones who talk to their teenagers about the family’s financial situation and how they manage their own money.” So it may be up to Generation Y to do a little bit of the legwork and actively try to understand the family’s finances.
Credit and debit cards are so ingrained in our financial interactions that sometimes we forget about ever carrying cash at all. Well, don’t, says Teacher Man, the pseudonym of a Manitoba high school teacher who writes on the popular finance blog, youngandthrifty.ca. Using cards to pay for all your purchases makes it that much easier to spend, and much easier for you to lose track of exactly how much money is coming out of your account. Cash, on the other hand, will always give you a bad wakeup call when you open up your wallet to find it empty. So if you realize that you really need to get serious, hide those cards somewhere you can’t reach them.
It can sometimes be easier to reward ourselves with a venti Starbucks drink after a long day’s work or to splurge on that new must-have item. But paying down your debt with whatever money you have is one of the only ways you can ensure a solid financial future. “We’re a generation that continues to accumulate debt without paying it down,” said Lesley Scorgie, millennial author of Rich by Thirty. “I think this generation has become a little too comfortable with carrying debt, whereas the previous generation, people were very interested in paying it down as soon as possible.” Go without the drink and choose to be debt-free instead – you’ll thank yourself in the future.
Many would-be students, says finance blogger Teacher Man, aren’t looking at what the job market is like and how high the post-graduation salaries are before choosing a program. Although it’s good to follow your dreams, he says, it is also good to inject some practicality into it. Don’t take out $100,000 in student loans when you know that the demand for jobs in your field isn’t very high, Teacher Man recommends.
Students are flocking to find work in large urban centres, but cities are having trouble finding work for all of them. “They have to be willing to move to where the jobs are,” said Teacher Man. If you hear of a job opening, even if it’s in a not so attractive area far from the conveniences of urban life, that has to be the choice you’re willing to make, he continues. Jobs won’t come running to you – but at least you can run to them. Pictured: The boom town of Fort McMurray, Alberta, where oil industry jobs are plentiful.
You’re out of school and unemployed or stuck in a job you’re overqualified for – but you still have all that money you have to pay back. Now what? One piece of advice is to not get discouraged. Says Lesley Scorgie: “People are very demotivated by debt, and understandably so. It’s that sphere of the unknown, that they won’t be able to achieve anything because they’re so buried in debt. And that’s just a myth. You can achieve success.” When you get discouraged, it is all too easy to stop doing anything towards your financial future because you feel as though mortgages, cars and being financially independent are all non-options for you. Recognize that those goals are still in your grasp and don’t get stuck in that rut.
Too many people think that saving and investing is about having a mathematical brain, or that to actively save means dedicating most of your money to your bank account. Many millennials, says John Tracy, vice-president of retail savings and investing at TD Bank, think saving will cut into the life they want to lead, and that being financially savvy means putting away hundreds of dollars a month. Not so!. A dollar a day is all it takes. These small acts, Tracy says, build up a good habit of saving, so that in you’re better prepared to handle the larger amounts of money when it eventually comes your way.
We’ve had some of the lowest interest rates in the country for a long time, points out John Tracy. High interest rates discourage consumption, while low interest rates encourage it, and we’re in an economy of such low interest rates, he says, that “the opportunity cost to consume today, in terms of paying interest, is much less.” This, however, lulls you into a false sense of security: What’ll happen when interest rates suddenly go up? They always inevitably do. Prepare for that future and pay down the money.
At the same time, all hope is not lost. Surprise! There are things that Generation Y is doing that do make them further ahead than other generations. Check out the five things that members of Gen Y are doing right with their money.
Generation Y is definitely looking to know more, says John Tracy, vice-president of retail savings and investing at TD Bank. What he has noticed is that there is a very strong interest among millennials in doing their research online before heading into the banks, and they’ll often do it all ahead of time so they know exactly what they want. Finance blogger “Teacher Man” says that he has noticed an upwards trend in traffic to his website as his content is searched for more and more often on the web. Google Trends shows that there has been a gradual increase in searches for “pay off debt” and “save for retirement” since 2005.
Millennials are, in fact, among the most conscientious shoppers out there today, said Lesley Scorgie, a millennial who is the best-selling author of Rich By Thirty. “It’s in fashion to be frugal now,” she said. Millennials, more than any other generation, say they have or would use a groupon deal in order to go on their first dates. In a U.S. survey conducted by Coupon Cabin, more than 40 per cent of adults had already used groupons on their first date. “That’s a hilarious stat. It’s now become socially acceptable for this generation to be frugal.” It’s no longer a taboo thing,” Scorgie said.
Millennials, says Teacher Man, out of all other generations, value a good work/life balance, which means that they are not too obsessed about money to forget that there is a plant that needs watering. At the same time, they aren’t shirkers. Millennials understand that they need a strong financial future. If they could just get the ball rolling, they’d go far.
Generation Y is the Internet generation, and that means that more millennials are using online banking and online money management tools than ever before. “I’m a big fan of online banking, because it saves me time, which in my mind makes me more efficient,” said Teacher Man, who is at the older end of Gen Y. “I can check my balance whenever I want, and for me that makes me more effective at managing my money.” But, he said, there is definitely a worry, as automatic payments make it easy to lose track of where your money is going. In general, however, online tools mean that it is easier than ever to keep on top of your finances and make sure you never forget to pay a bill.
Being an entrepreneur is the new best thing for millennials, says Rich by Thirty author Lesley Scorgie, especially in times when earning money the traditional way is so hard. Working your way up isn’t so easy anymore, but students who are just starting out do not have experience or opportunities coming out their back pocket. “This generation is willing to try non-traditional things. One of the gals that worked for me at one point, now she’s starting a headband company after graduating and finding it very difficult to find a job,” Scorgie said. Go out on a limb, and you might be rewarded.
Most of Generation Y simply wants what our parents had. A graduation met with impending job prospects, a steady source of engaging employment, health benefits and a retirement plan, a partner, homeownership, a family, and a two-car garage.
To be frank, all we really want is for that ugly lie our high school guidance councillors told us in senior year "if you go to a good university and work hard, doors will open for you," to be true.
But it's not.
Instead, thanks to a particularly nasty and seemingly irreversible combination of inflation and recession, the North American dream that was enjoyed by the Baby Boomers seems to be becoming more and more unattainable with each passing year.
I'm sure many will brush these frustrations off as nothing more than the ramblings of an overly entitled generation of suburbans unwilling to pull themselves up by those same bootstraps that they did, but let's take a quick look at the numbers.
In 1979 it took roughly 800 hours of minimum wage work to earn the cost of bachelors' degree ($2,568), by 2012 the cost had risen to 2,200 hours ($22,324). As a consequence, most current post-secondary students are forced to take on lofty loans to cover the spread, leaving Millennials in a situation where over half of us will owe upwards of $20,000 when we finally enter that increasingly barren job market.
As for housing costs, the average Canadian home in 1984 cost $76,214, adjusted for inflation that's $154,587. Yet in 2012, the actual average was more like $369,677 -- an annualised gain of 5.8 per cent. So while in the mid-80s a home may have cost a family around 1.6 times its annual income, the multiple today is somewhere closer to 6.
Thus when it comes time to approach an insolvent and saturated job market ripe with 14.1 per cent youth unemployment in our misguided attempt to make enough to pay off those loans, save for that house down payment, and eat regularly, we're increasingly met with hiring freezes, short-term contracts, unpaid internships, underemployment, and unemployment altogether.
In my opinion, this unapologetic letter by an anonymous Millennial on the difficulties of landing that first job serves as the perfect snapshot for the perpetually frustrating and utterly distressing process of entering adulthood for our generation.
Yet we march onward, labelled as lazy and spoiled by an older generation who could pay tuition in a few summers, afford a house by 30, and enjoy full benefits coupled with a fully functional and institutionally preserved social safety net. No matter how hard we work, these goals are unrealistic for most of us -- this is not some apathetic plea for pity, it's a reflection of our current socio-economic reality.
And with this reality showing no real signs of the drastic reversion necessary for us Millennials to build more financially stable foundations anytime soon, perhaps it's time for us to stop clinging to that unsustainable and excessive status quo set by the Baby Boomers in the feeble hope that we'll someday be invited to re-perpetuate it.
Perhaps it's time to stop squirming and come to terms with the realization that the excessive consumption and political anachronism that has come to embody our parents' generation is nothing to aspire to, and in fact cannot -- nor should not, be repeated.
Instead, we've got a golden opportunity to re-define how we conceptualise key pillars of society such as wealth, environmental mindfulness, and political engagement.
Let me be clear -- I'm not advocating the manifestation of some instantaneous socialist utopia where the grass is green, the birds are chirping, and the workers have broken their chains. What I am saying is much more attainable than that.
Wealth shouldn't be a 5,000 square ft. home with three SUVs, when a modest bungalow and a smart car will do just fine, environmental mindfulness shouldn't be "greener" oil when plausible renewable solutions exist, and political engagement shouldn't be sheepishly voting for whatever candidate we're presented with when a democratic government is supposed to serve citizens with its policies, not the other way around.
We're equipped like no other generation to do this. All these technologies we're supposed to be thankful for -- the ones which we've unknowingly traded in our right to a real job or home in order to enjoy, serve as tools that can allow us Millennials to connect our minds and our movements around the world in order to take back our indefinitely postponed futures.
Follow Adam Kingsmith on Twitter: www.twitter.com/akingsmith